11 out of 18 polled said the zenith was reached on June 30th of
2014, and 12 said the cash hoard will max out between $3.5-4
trillion.

“It means the central bank has to find other sources to
inject liquidity - it has to cut the required reserves, it has to
create more open-market tools,” Xi Junyang, a professor at
Shanghai University of Finance and Economics, told Bloomberg
News.

China holds the world’s biggest foreign currency (FX) reserves,
which currently stand at $3.9 trillion. The stockpile reached its
peak of $3.99 trillion in June 2014 before dropping significantly
in the third quarter of 2014 down to $3.89 trillion, the biggest
drop in the central bank’s history.

In 1979, foreign reserves stood at just $167 million under then
President Deng Xiaoping

Assets are held by the People’s Republic Central Bank (PCB), and
are rumored to consist of about two thirds dollars, a quarter in
euro, and the rest in pounds sterling, yen, and other currencies.
The People’s Bank is secretive about the exact holdings.

China’s FX reserves have been boosted in part by the weakening of
the yuan after the PCB began intensive interventions to shake off
speculators. The currency lost 2.4 percent in 2014, which was the
first depreciation of the currency since 2005. Analysts believe
interventions will be less likely in 2015.

“For China’s central bank, it means the single most important
source of liquidity is gone,” Junyang said.

Regular interventions have been halted as China moves towards
unpegging its currency and bringing it to a market-determined
exchange rate. The direct interventions run contrary to this
stated goal, which China originally set to be met by 2015. In a
traditional sense, the FX reserve is meant as a buffer in times
of emergency and is used for the repayment of external debt.

The country is seeking to open up its economy to market forces,
and as part of that linked the Shanghai and Hong Kong stock
exchanges in December.

The Chinese economy has been keeping pace with the world’s
biggest, the US, and in October, surpassed the superpower in terms of
purchasing-power-adjusted GDP. In terms of real GDP, the US
remains the top player, with a $16.8 trillion economy.

There has been a loss in foreign investment as Beijing advocates
for more home-grown business, which is pushing out foreign
competitors, and investment in dollars.

The world’s second-largest economy expanded 7.3 percent in 2014,
but is expected to slow to 7.0 percent in 2015, according to a
Goldman Sachs estimate.